The Louvre Museum has 8.5 million visitors per year. This blog was viewed about 100,000 times in 2013. If it were an exhibit at the Louvre Museum, it would take about 4 days for that many people to see it.

The Budget at Completion (BAC) is how much the project is supposed to cost when finished. However, during the project it may become clear that the project will not end up costing what it is supposed to cost. The Estimate at Completion (EAC) replaces the BAC for the amount that the project is now believed to cost when it is completed. Calculating EACs are part of the tool and technique of forecasting outlined in the fourth edition PMBOK®’s Control Costs process.

One method of calculating EAC takes into consideration both the Cost Performance Index (CPI) and Schedule Performance Index (SPI). The assumptions for this formula are that the project is going poorly—the cost performance has been poor and that there is a deadline that cannot be moved. The formula is EAC = AC + ([BAC – EV] / [cumulative CPI * cumulative SPI]). Note that one may use discretion to weight the CPI and SPI. If perhaps the CPI is three times more important than the SPI for a certain project, they can be weighted at 75/25. So what has been actually spent thus far (AC) is added to the result of the total budget (BAC) with the worth of the work (EV) subtracted from it which is then divided by the product of how closely on-budget the project is (CPI) and how closely on-schedule the budget is (SPI).

For example, Carl and his siblings are working on restoring a car. The BAC is $500, but now they suspect that this project will cost more than $500. So far they have spent $450. Of all the work that the car needs done, they believe that they have 80% of it completed at this point. They expected to work 5 months on this project and spend $100 each month for the total BAC of $500. They just completed the third month of working on the car.

We already know AC and BAC, but we need to quickly calculate the Earned Value (EV) so that we can use it to calculate CPI and SPI; and we also need to calculate Planned Value (PV) for use in calculating SPI. The work is 80% complete, and 80% of the BAC (which is $500) is $400, so the EV, the value of the work completed, is $400. They planned to spend $100 per month and they have just completed the third month, so the PV is $100 x 3, which is $300. CPI is calculated by EV/ AC = $400/$450 = 0.89. SPI is calculated by EV/PV = $400/$300 = 1.33.

]]>https://tapuniversity.wordpress.com/2013/11/26/estimate-at-completion-using-cpi-and-spi-method-5th-edition-pmbok/feed/0estimates_remainingdkohrellestimates_remainingEarned Value Management – CPI and SPIhttps://tapuniversity.wordpress.com/2013/11/09/earned-value-management-cpi-and-spi/
https://tapuniversity.wordpress.com/2013/11/09/earned-value-management-cpi-and-spi/#respondSat, 09 Nov 2013 21:25:54 +0000http://tapuniversity.com/?p=3234Cost Performance Index (CPI) and Schedule Performance Index (SPI) are indicators of how closely accomplished work is on budget and on schedule. CPI shows how many dollars (or other type of currency) worth of work is being accomplished for every dollar spent. SPI shows how the work is progressing compared to the original schedule.

The formula for CPI = EV / AC and the formula for SPI = EV / PV. Both of these formulas begin with Earned Value (EV), which is the value of the work already accomplished. The actual amount of money spent is represented by Actual Cost (AC). Planned Value (PV) is how much we estimate the value to be of the work that we’re planning to do. Another way of thinking about PV is the amount of money we’ve budgeted for the work scheduled at that point in time. If CPI is less than 1.0, the project is over budget; if CPI is more than 1.0, the project is under budget. If SPI is less than 1.0, the project is behind schedule; if SPI is more than 1.0, the project is ahead of schedule.

Earned Value and Design

Here is an example: Carl’s car re-design project has a total budget of $4 million to be spent evenly throughout the one year scheduled to complete the project. The project is now one-fourth completed. So far they have actually spent $2 million, and they have only worked two full months on the project.

What is the AC? It’s 2 million dollars, because that is how much they have actually spent.

What is the EV? It’s 1 million dollars, because 1/4 of the work is done, and 1/4 of the $4 million budget is $1 million.

What is the PV? It’s 2/3 million dollars. There is $4 million to spend evenly over 12 months, so every month they were budgeted to spend 1/3 of one million dollars. They have worked 2 months, so they had planned to spend 2/3 million dollars at this point.

What is the CPI? It’s .50. CPI = EV / AC = $1 million / $2 million = .50 The CPI is less than 1.0, meaning that the project is over budget at this point. They are only getting fifty cents worth of work out of every dollar they are spending.

What is the SPI? It’s 1.50. SPI = EV / PV = $1 million / $2/3 million = 1.50. The SPI is over 1.0, meaning that the project is ahead of schedule by 150% of the planned rate.

Project exclusions, assumptions, and constraints (among other information) are included in a Project Scope Statement. They’re also explicitly referenced in the Develop Project Charter, Plan Project Plan and Plan Procurement Management processes. Each of the 47 processes has an implicit reference to exclusions, assumptions and constraints.

Here’s a simple example to help you lock in the differences among exclusion, assumption and constraints. Anna has a project to make exotic papaya honey cookies to enter in her city’s bake-off competition. The scope of the project is to make and enter one dozen cookies for the competition. Here are some examples of exclusions, assumptions, and constraints for this project.

Project exclusions are those things that outside of the project boundaries. It explicitly states what is not included in the project. This project does not include making enough cookies for Anna to eat some herself. Well OK – she’ll likely sneak one or two! This project does not include submitting her recipe to the judges.

Project assumptions are those things that are believed to be true. Anna believes that she’ll be able to obtain the cookie ingredients from her local grocery store. If they aren’t available at her local grocery store, she feels she can borrow some from a neighbor. She also believes that her car will reliably transport her and the cookies to the competition. We’ll omit the slang term for what a bad assumption makes someone!

Project constraints are limitations placed upon the project team. Anna must have the cookies delivered to the competition one hour before the judging starts. Her budget insists that she spend no more than fifty dollars on exotic ingredients for the cookies.

The Program Evaluation and Review Technique (PERT) formula or 3 point estimating is a simple and useful tool for project managers, and those who are planning to take their PMP Exam should have it memorized.

There is much more to PERT as a project scheduling and planning technique than this formula, but here we’ll focus just on the formula. The PERT formula is mentioned in the 5th edition PMBOK® as a tool and technique of three processes—Estimate Activity Durations, Estimate Costs and Perform Quality Assurance. The formula provides a weighted estimates. The formula doesn’t care if the numbers you use represent time or money—so that’s why it’s in Time, Cost and Quality knowledge areas.

To use this formula, we need three estimates—Optimistic (best-case scenario), Most Likely (realistic), and Pessimistic (worst-case scenario). We then find the average, but we first weight the Most Likely estimate by 4. The formula is (O + (4*ML) + P) / 6. We must divide by six because we in effect have six different estimates (although four of these estimates are the same number). We are averaging (O + ML + ML + ML + ML + P) / 6.

Here’s an example. The Estemitte family is driving home. They guess they are most likely 10 minutes from home, so that is their Most Likely estimate. If all the lights turn green, they guess it may take just 7 minutes to get home, so that is their Optimistic estimate. If it starts raining hard, they guess it may take them 12 minutes to get home, so that is their Pessimistic estimate. We simply put these numbers into the formula: (7 + 10 + 10 + 10 + 10 + 12) / 6 = 9.83 minutes.

This formula is most useful in estimating time or cost of activities for projects that are especially unique, such as in research and development where there are many unknowns. For projects that are similar to previous projects and there is good historical data and expert experience, the formula is less useful.

But don’t worry we have your back at TAPUniversity. Our blog minions, elves and other noble folk are updating over 300 PMBOK rocking entries for the hefty new PMBOK. Yours truly, David, has seen this rodeo before. Why I remember the very first PMBOK – pdf and free it was from 1996. So we will make sure you’re ready! As the transition occurs you will see a 4th and 5th edition version noted.

Now it’s not just about us here at TAPUniversity. As we find other crisp and cool PMBOK 5th Edition blogs, articles, we will share and give humble tribute!

Oh, if you’re in the midst of your PMP preparation – get that out of the way by July! Really, you and your loved ones will thank you for it!

]]>https://tapuniversity.wordpress.com/2013/02/28/pmbok-5th-edition/feed/2scream_of_fear_strasberg_scream1243474176dkohrellPMBOK 5th Edition Program Management gets real in the Market to Market 2012https://tapuniversity.wordpress.com/2012/10/19/program-management-gets-real-in-the-market-to-market-2012/
https://tapuniversity.wordpress.com/2012/10/19/program-management-gets-real-in-the-market-to-market-2012/#respondFri, 19 Oct 2012 15:04:46 +0000http://tapuniversity.com/?p=3050Program management involves orchestrating several inter-related projects. Often times a program grows out of a large project.

M2M Transition

While reflecting upon a wonderful weekend of running with close friends and over 3,000 other friends, covering a distance of 78 miles in teams of six to eight, it dawned on me – that event was a perfect, real relay and PROGRAM management example. Running has enjoyed two waves of popularity – the first in late 70’s into early 80’s with giants of the sport like Shorter, Rodgers, Salazar and Prefontaine launched the birth of competitor driven phenomena.

Ben Cohoon and faithful business partner!”

The second wave began just a few years ago, this time not driven by elites and pure road races, but a mix of events that draw in wide participant range to color runs, warrior dashes, half-marathons and relay events. Proof of that growth is one weekend in modestly populated Nebraska where several events sprang forth: The Market-to-Market Relay (78 miles, 400 teams over 3,000 runners), Market-to-Market 50k (300), Double Half Mary (300 total), Monument Marathon – 5k (400), Pumpkin Run in Lincoln (3,457 kids!) – 7,457 Total! Running is something to experience NOT watch. We will never draw the numbers on the TV. We do absolutely kick booty for the in-person, life long experience.

Now for the project management moment of that reflection. The Market-To-Market Relay is a wonderful example of a program. Each relay team is its own project. There are 400 of those sharing the same goal. That is string together 20 legs of running from Omaha to Lincoln Nebraska within 7 to 13 hours, managing risks of car support, inclement weather, fatigue and in adequate resources while keeping team morale and focus together.

Ben Cohoon is the visionary and race director for the Market-to-Market Relay. He started running in 2006 and saw a need.

“I saw that there was relay events in other areas and wondered why Nebraska did not have one. Talking with a few folks in the running community, they told me it was a good idea but if I wanted one, I should start one. So I wrote a business plan, then began creating. It was 18 months from idea to the first race day in 2008.”

It was two years from the start of a passion to the launch of an event. The first year was indeed a green turf, launch. Ups and downs and lots of adjustments. Yet it caught on and grew from several teams and hundreds of people to 400 teams, 3,000 participants and addition of 50k solo run drawing another 300 in 2012.

My piece of weekend of racing was a part of the Freaky Fast Mixed team – a group of eight fun, freaky and sometimes fast people – two guys, six gals! In addition twenty other Freaks were interspersed on six other teams! Each of us cranked out 7-11 miles for the day. The scenery was stunning at times – yup even for Nebraska that can happen. The camaraderie among teams and within teams was inspiring.

Strategy time! Captain Bry working the hand signals to Damon on the navigation!

I had the fortune of serving as a “SME” rather than project management. My SME’ness was more in doing lots of crazy endurance events not speed! Bry Schulz was our captain and project manager. She was outstanding – handing out tasks like veteran project manager. Ensuring logistics were ready. Bringing two sub-teams together on race day – the guys rode up in the morning while the gals enjoyed posh accommodations in a hotel near the start. Keeping the day fun and focused (tough for any team I’m a part of – the focus that is!)

My real contribution to the team – relaxing!

As the program manager Ben Cohoon had to make some tough calls – after a rather long drought – rain, thunder and lightning paid a visit. While grateful for the moisture it did put a crimp in the early start groups and final celebration. Ben and team already planned for those risks (foolish not to in Nebraska) and had some response strategies ready! The lightning guidance was shared with each captain (er PM) and course officials executed the responses perfectly.

The improvised workarounds for our project team included a coffee stop for the five coffee drinkers (race day is not a good day to quit), extra plastic on the floor of the beautiful GMC Denali supplied by Bry’s in-laws, extra sugarless gum (runner’s breath, ugh!) and hastily secured reflectors (yes those were in the project guidance but we only had one of two required). Yes read those requirements!

So if you need a practical example of a program to project relationship, look around you, it may just be a jaunt away!

Bait and switch. Pitch the A team and send in the D team. Front load the client engagement up high and deliver low. Three consulting slang terms for subletting talent or substituting in lesser skilled or experienced talent for the one proposed for an engagement.

In program and project management the engagements typically involve the Big Three implementation consultants (Bain, BCG – Boston Consulting Group and McKinsey) though the Big Four Audit/Accounting Firms play as well (PWC, E&Y, KPMG, Deloitte). Additionally there are several spin offs from the original Big Eight/Five such as Bearing Point or one of the existing Big Three/Four. The vast majority of time these firms provide outstanding guidance and direction.

There is a dirty trick o pitching a solid cast for a program and then delivering a different set of consultants. The idea is the swag of the firm makes the revenue; then that firm holds the bottom line by sending in an, on average, a one to three year experienced freshly scrubbed consultant.

The trick introduces a downside for both the client and consultant!

For the client it’s the uncertainty of who actually shows up at your door step. Rather than receiving a true expert in Oracle database migration, process change, program management or product development, the client ends up with newly minted MBA whose key experience has been internships. Not necessarily bad if they have the chops – until the $250 to $375 bill rate hits . Think NFL replacement refs – they were fine in Division 3 college football but a disaster on the big stage.

To manage that risk contracts should include an non-substitution or mutual approval clause. That works well for Fixed contracts. It can also be applied to Time and Material contracts. The barrier to this I’ve found is the executive resistance – the false premise and promise that “ACME” consulting will fix this!

For the consultant it’s that pressure to take gigs in Nebraska versus San Francisco, rotating in for 90 days or a year and not getting the perks until 2-3 years when the 70-80 hour weeks and zero work-life balance send you to an exit strategy. Oh and there’s that ever-present risk of being exposed as the “emperor without any clothing” – i.e., getting revealed as something akin to a fraud when the skill in person does not live up to what’s on the resume. The following article from Mark Wong provides some insight from that side of the ledger.

Here are some tips, if you are a local program or project consultant/contractor or director who may need to navigate an approval process that is reluctant to admit a miss – especially concerning one of “the Bigs”

Measure the results of the Big consulting group as you would any resource. You manage what you measure. Keep that measurement in your client’s turf rather than accepting a sanitized report, PowerPoint summary from the “Big”

Find the contract officer and become their best friend. Ensure non-substitution clauses are included or at the very least mutually agreed substitution.

Screen for local or boutique consulting firms that may offer better service for less with the same talent pitched and deployed.

Discern when to push and when to back away. Regrettably the right thing in the right way may not be there today. Keep engaged to improve the process the next time.

]]>https://tapuniversity.wordpress.com/2012/10/09/dirty-consulting-tricks-subletting-the-talent/feed/0NFL_replacement_refs_miss_calldkohrellNFL_replacement_refs_miss_callMarketing has a New Lean Diethttps://tapuniversity.wordpress.com/2012/10/05/marketing-has-a-new-lean-diet/
https://tapuniversity.wordpress.com/2012/10/05/marketing-has-a-new-lean-diet/#respondFri, 05 Oct 2012 21:18:42 +0000http://tapuniversity.com/?p=3027In today’s economic climate, it’s not uncommon for organizations to drastically cut their marketing budgets in an effort to improve their bottom line. And yet, during this fiscal downturn, the need is even more prevalent to reach consumers, improve branding and broaden market shares. Marketing staff must find ways to identify opportunities in both new and existing markets by using resources in smarter ways; in other words, by applying Lean Thinking.

Many marketing professionals fail to realize that marketing is a ‘process’ and one that needs to be managed from beginning to end. Those familiar with Lean methodologies understand that the same framework used in IT and manufacturing can be applied to marketing as well.

Lean Application and Implications

Before any organization can use Lean strategies, the basic implications and methodology must be understood by all team members. Here are several of the key concepts for today’s Lean Marketer.

Lean Culture

A Lean culture understands the value of its customers. It continually strives to offer great value back to the customer through a creation and development process that has zero waste. Eliminating waste along all marketing channels, not just at isolated points, creates processes that require less capital and resources, and less time to develop fully-realized campaigns. Organizations are then able to respond to varying customer needs with high quality and low cost messaging.

Lean in the Big Picture

Contrary to popular belief, a Lean, customer-driven approach to marketing is not in direct opposition to bigger, innovative ideas. One need only look at some of the biggest entrepreneurs in the country to see just how effective incorporating Lean methods are in driving a big vision.

Start-ups would be wise to adopt this approach in their business. Instead of focusing on whether their big idea is big enough, new businesses should instead focus on what type of problem they’re trying to solve. Whether the problem is highly complex without aid of a precedent, or a recognizable problem with proof points, identifying it first means being better able to assess the tools and framework to be used in creating solutions.

The Lean Process

Unlike some business processes which have clearly defined beginning and end points, the Lean process is a never-ending cycle of constant communication and improvement of the message. Some key milestones in the Lean process as it relates to marketing are:

Offer training to provide new skills to the Sales & Marketing team

Conduct an in depth evaluation in order to understand the psychology behind customer buying habits

Provide a thorough analysis of competition, benchmarking and market trends

A critical concept in Lean strategies is being intimately involved with your customer’s needs – therefore any approach to a Lean process should start by defining value from the customer’s point of view. In terms of marketing, how best can you get your message across that aligns with buyer consciousness, and how can you deliver it with no resources wasted.

Here are some specific ways a sales and marketing team can apply Lean strategies in their campaigns:

Record the marketing & sales process. Every step of getting the marketing message across and eventually closing a sale should be fully documented. This written process can then be re-evaluated with the intent of refining creative conversions.

Create a playbook. From your initial documented sales & marketing process, build a road map for all team players to follow, yet continuously look for roadways that carry less risk and capital expenditure.

Implement Definable Metrics. Marketing & media campaigns aim at consumer awareness and the sharing of information. These are what some would call cognitive dimensions and they are by nature somewhat difficult to measure, but metrics must be defined in order to track impact per exposure.

While Lean’s application had its origins in manufacturing, the principals can be implemented successfully in a marketing space as well. The fundamentals of re-assessing all capabilities and resources from a customer standpoint while mapping a sales value stream can ensure an organization’s incremental gross margin on sales.

—

Ryan Sauer is a writer and editor for University Alliance in association with Bisk Education. He covers topics such as project management training, manufacturing methodologies, and software development. Through the University Alliance, Ryan strives to help professionals succeed in passing their PMP certification exam.

The irony is as a time and material consultant, I’m often in the position of policing other time and material resources. That’s the old “fox guarding the hen-house!”. Often, due to specialty or my own naiveté in bidding, those resources may bill at twice my rate. Here’s a quick contract review (aka Procurement in the PMBOK) . The three contract types are:

Time and Material – used for quick resource addition, resources are paid on an hourly rate. The benefit is it’s fast. The negative is lack of control and accountability.

Fixed Bid – used where time allows for a thorough vetting of requirements. Buyer takes more time up front. Seller assumes some risk. Benefit is accountability and certainty of end product. The negative is front loading of costs and change order cost.

Cost Plus variants – used in situation where the seller needs to address essential costs (think road or building construction) and buyer wants to ensure incentives for delivery. Benefit is an understanding of cost structure and somewhat easier contract than Fixed to initiate. The negative is the complexity to administer once the contract is awarded.

So the contract type I’m talking about is Time and Material (T&M). The leaky faucets I’ve observed have turned into a down right flood after a contracting company was vetted and selected to deliver contracting services. The scenarios in four different instances were eerily similar:

Crisis at client company

Knee jerk reaction by leadership to “get bodies”

Appropriate vetting of the initial Time and Material contractor selection

Lack or zero oversight of whom that T&M contractor supplies or the work produced

Chaos in terms of the number of contractors and number of hours billed

Does this sound familiar? Have you encountered something similar? What did you do?

There were three things I’ve found helpful (without getting fired :-))!

Measure what’s produced on a daily and weekly basis. Simple, right? But in each case it seemed revolutionary. Also, coach your client to cap open-ended contracts in 60 to 90 day bursts. If nothing else you’ll help introduce external purchasing reviews before the next 90 day burst begins. Hopefully you’ll instill a sense of accountability and review to see if the contract and resources need to continue – remember the services company motivation is to stay and bill as much as possible!

Seek and review the contract – as you do so communicate your fiduciary commitment to your client as a project or contract manager.

Positively escalate, in person, the results of your measurement. Never address via email. You can anticipate push back from the contracting services company. In a professional, “healthy” situation, that push-back will be mild, more of “OK, so what is you need contract PM?”. In an insidious “Slitheryn” environment anticipate hostility. So as we say in the Heartland of America – get ready to “cowboy it up”!